Business, Legal & Accounting Glossary
Many cards now charge a percentage of balances transferred onto them
Introductory balance transfer offers have been incredibly popular with credit card users over the last 5 years or so since they were introduced to the UK by Egg plc, especially when people discovered that by constantly moving balances from card to card as the introductory periods ended, they could in effect get an interest free loan over an indefinite term.
This phenomena of the card tart ended up costing credit card companies a small fortune in uncollected interest, and not surprisingly the industry began to look for a way to tilt the balance back into the card companies’ favour.
The result was the balance transfer fee, where a percentage of the balance you transfer to a new card is charged to your account. A typical rate for this charge is 2%, which could work out to be a hefty sum if you’re transferring a substantial amount.
In practice, most cards who charge a fee cap the amount they charge at a maximum of £50 or so, but check the small print carefully – some cards have no upper limit to how much they’ll charge.
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This glossary post was last updated: 15th February, 2020 | 3 Views.